Latest / Professional Ag Marketing Podcast / Macro Overview and NPIC

Transcript

Macro Overview and NPIC · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the egg markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:24
  SPEAKER_01: Today is July 15th and I've got Luke Wells with us from Professional Egg Marketing.
• 0:29
  SPEAKER_01: How's it going, Luke?
• 0:30
  SPEAKER_00: It's going well.
• 0:30
  SPEAKER_00: Good afternoon, Mike.
• 0:31
  SPEAKER_01: Good afternoon.
• 0:32
  SPEAKER_01: Well, we're going to talk a little bit about a macro overview for a few things like uh outside market influences, grains, and then uh after some hog fundamentals here, Luke, uh, I'm gonna have you talk about the National Pork Industry Conference a little bit.
• 0:46
  SPEAKER_01: How's that sound?
• 0:46
  SPEAKER_00: Let's get her going, bud.
• 0:48
  SPEAKER_01: Awesome.
• 0:49
  SPEAKER_01: Well, it was another active week in the grain market specifically, but we had some more outside market influence in the middle of July than we normally do for this time of the year.
• 0:59
  SPEAKER_01: We are experiencing some drier conditions in the western corn belt, but they did get a little watered down quite literally uh today after i Illinois and uh Chicago, eastern Iowa, some of those eastern cornbelt areas got some key rains after getting put into some more droughty conditions here as of late.
• 1:19
  SPEAKER_01: So uh for us seeing rainfall on July 15th in the eastern corn belt across to Chicago, for example, uh we saw December corn up two cents today.
• 1:32
  SPEAKER_01: It held together pretty well, I thought, compared to what it probably could have been.
• 1:36
  SPEAKER_01: Now, earlier in the week we did see some harder selling off on Monday and Tuesday, but the odd part was we were feeling more outside market influence from those uh from those trading sessions.
• 1:47
  SPEAKER_01: So we did have a WASI report on Tuesday.
• 1:51
  SPEAKER_01: That uh report was a little bit more of a snoozer, I would say, on the grain side of things, stocks were a little bit higher across the board.
• 1:58
  SPEAKER_01: Uh ending stocks to use ratios now 10.1% for next year's corn crop.
• 2:04
  SPEAKER_01: Uh a little bit bearish, but not crazy for what we saw Tuesday's prices do.
• 2:09
  SPEAKER_01: And when we started looking at some of the weekend rains that happened today, maybe that was priced in a little bit of Tuesday's uh sell-off.
• 2:17
  SPEAKER_01: But the outside market influence, when we uh were going into Wednesday's CPI report there, Luke, we saw a uh consumer price index that increased 9.1% versus the 8.8% average that was expected.
• 2:32
  SPEAKER_01: So inflation isn't slowing like they were expecting it to.
• 2:36
  SPEAKER_01: When we look at that number, it's not really bullish for commodities, period.
• 2:41
  SPEAKER_01: Grains may have a fundamental issue developing with the dry weather in the west, and some of those areas in the east were, but they got some uh rain today anyways to help out.
• 2:51
  SPEAKER_01: But uh the macro picture overall is that the Fed will continue to push rates higher and that the uh that will be bullish the US dollar, which is not very bullish for commodity prices going forward out of the United States.
• 3:05
  SPEAKER_01: So you know, after the report of the CPI report, initially they bought commodities right away.
• 3:11
  SPEAKER_01: They they played the inflation hedge but quickly reverted back from an inflation hedge to a recession hedge as they continue to worry about that in the big uh long-term scope of things.
• 3:24
  SPEAKER_01: So in general, financial and commodity markets are still really worried about a slowdown in the global economy due to inflation and supply chain challenges.
• 3:32
  SPEAKER_01: And uh also seeing some things over in China as well this week that aren't helping things along as well with uh increased infection rates, lockdowns, uh their their uh growth was slowing, I believe, uh one of their slowest growth periods this week as well.
• 3:47
  SPEAKER_01: Uh versus history here uh back to pretty much even on that, which you know it's 9% is normally what they would expect out of them to see a sub one number is pretty crazy.
• 3:59
  SPEAKER_01: So that's kind of what we saw from an outside market influence.
• 4:02
  SPEAKER_01: The crude oil markets stepped back quite a bit lately on some uh global demand concerns, and uh for the rest of the commodities here, nobody wants to step in the way of that uh and buy commodities today, especially this time of the year from a seasonal perspective on a lot of them.
• 4:17
  SPEAKER_01: You usually hit some highs here, so not a lot of buying.
• 4:21
  SPEAKER_01: On the soybean side of things, you did see uh the report.
• 4:25
  SPEAKER_01: They uh lowered some projections on supplies there or production.
• 4:30
  SPEAKER_01: That was uh to tag along with a little bit lower acres.
• 4:32
  SPEAKER_01: We'll see what the resurvey time frame brings us here for the Dakotas and Minnesotas in uh August.
• 4:38
  SPEAKER_01: The demand side was down about 10 million bushels on the crush and then down about 65 million bushels on the soybean uh exports.
• 4:48
  SPEAKER_01: But as we get into the livestock here, I'll touch on the cattle real quick, Luke.
• 4:54
  SPEAKER_01: Week over week here we saw cash about 140 to 150, kinda in the north.
• 4:59
  SPEAKER_01: Bulk of the trade was probably two to four lower out of the northern trade on cash.
• 5:03
  SPEAKER_01: So a little bit softer.
• 5:05
  SPEAKER_01: The south held around pretty decent, really.
• 5:07
  SPEAKER_01: But uh July's expected to be hot, some scorching temperatures here from here on out, kinda as we've talked about, and uh present in much of the nation's uh midsection.
• 5:18
  SPEAKER_01: Uh kind of gonna take heat to a whole new level here when it when we're looking at it.
• 5:22
  SPEAKER_01: So it's gonna be rough on these cattle, rough on the grains as well going forward.
• 5:26
  SPEAKER_01: But the cattle side of things futures have pulled back on cash trade being a little weaker this week and then recessionary fears as well.
• 5:34
  SPEAKER_01: Um overall, I mean, we've just seen uh commodity liquidation and the funds are kind of exiting all commodities in general.
• 5:42
  SPEAKER_01: Uh for the cattle, anyways, uh they fall right into that category as well.
• 5:46
  SPEAKER_01: So it also influences uh, you know, packer margins.
• 5:50
  SPEAKER_01: They're narrowing in the north a little bit.
• 5:52
  SPEAKER_01: They're historically pretty decent in the south at least, but the heyday of uh runaway margins for these processors is kind of over with when it comes to uh how we're sitting currently.
• 6:03
  SPEAKER_01: So current margins are sufficient to hold uh slaughter rates up, but nothing to get too crazy about on the cattle.
• 6:10
  SPEAKER_01: On the uh hog side of things, Lucas, how do you uh see the hog fundamentals here currently?
• 6:16
  SPEAKER_00: Yeah, starting kind of look at the hogs here, Mike.
• 6:19
  SPEAKER_00: We uh finished pretty strong.
• 6:20
  SPEAKER_00: July expired today, and we've you know the front end of this complex continues to perform uh really well, kind of led uh by the cutout.
• 6:30
  SPEAKER_00: Cutout's been something we've talked a lot about uh the last few weeks, and and kind of the story has been it's it's been kind of stuck at that 110, 115 type mark.
• 6:39
  SPEAKER_00: Um, I'd say though, uh, you know, even though we had a nice week on the cutout, uh closed this afternoon a little bit over 122 bucks, which which is a good number.
• 6:49
  SPEAKER_00: It's a high water mark, at least for this summer.
• 6:51
  SPEAKER_00: Um little bit artificially created.
• 6:54
  SPEAKER_00: Um packer margins have have been tough from where they'd want them to be.
• 6:58
  SPEAKER_00: So um we've seen some pretty aggressive kill cuts this week.
• 7:03
  SPEAKER_00: Uh let's look at the numbers, Mike.
• 7:05
  SPEAKER_00: Uh it appears today we killed 436,000 hogs.
• 7:09
  SPEAKER_00: Really light Saturday schedule for tomorrow, 22,000.
• 7:13
  SPEAKER_00: So that gives us like a week to date of like uh two five five, two point two five five million.
• 7:20
  SPEAKER_00: Um, so less product to the market, uh pushing that, pushing that product up.
• 7:25
  SPEAKER_00: Um, cash continues to hang in all right, just kind of from a fundamental perspective.
• 7:30
  SPEAKER_00: We close the Western Corn Belt out, not with new tops this week per se, um, but uh consistent kind of tops, Western Corn Belt at one 124.76.
• 7:40
  SPEAKER_00: Uh so what the market's kind of you know back and forth on, Mike, is we're we're pushing the product up a little bit here, um cutting some kills, but it doesn't mean those pigs disappeared, right?
• 7:51
  SPEAKER_00: So you've got July kind of going straight up here, real strong, but you know, August has discounted uh you know a little bit uh five bucks really to the July, and and August was kind of steady this week, slightly down, but October, December, somewhat I'd say kind of ranging off of some of the broader inflationary recession type tones, but lost a little ground in October and December here to here to close the week up.
• 8:16
  SPEAKER_00: So we'll we'll step back into next week.
• 8:18
  SPEAKER_00: The the the market will really like uh that higher cutout number, right?
• 8:22
  SPEAKER_00: Um, but it's kind of seesawing back and forth between you know some some better front-end news, kind of coupled with where's this thing going from a you know from a broader sense.
• 8:33
  SPEAKER_00: Uh margins on the week, just to touch uh uh you know, really uh really high level on those.
• 8:40
  SPEAKER_00: Honestly, we saw some of our better margins uh kind of for the you know 23 type crop year this week.
• 8:46
  SPEAKER_00: Didn't end the week on that note.
• 8:48
  SPEAKER_00: It kind of depends on where corn is that day, right?
• 8:51
  SPEAKER_00: Um we did lose a little on hogs towards the end of the week.
• 8:54
  SPEAKER_00: Um, but corn, you know, it seems like it, even though we only changed two cents today, it what we have like 42 cent change was earlier in the week, 20 up, 20 down.
• 9:03
  SPEAKER_00: It's it's been moving.
• 9:04
  SPEAKER_00: So just kind of watch that with the weather as it goes and and and keep an eye on that standpoint.
• 9:09
  SPEAKER_00: I'd say the other thing to to kind of talk about a little bit on the hogs, um, exports.
• 9:14
  SPEAKER_00: Uh exports have been difficult for us uh year to date, um, and that's really the lack of China.
• 9:21
  SPEAKER_00: Um, Mexico's been the shining star.
• 9:23
  SPEAKER_00: But that's that's also the other kind of talk creeping into the industry is you know, Chinese hog prices have come up really fast.
• 9:30
  SPEAKER_00: Um, and and and so there's some talk that that they may be coming into the market.
• 9:36
  SPEAKER_00: Um, there was some talk that they kind of started to look at some international buyers last week, maybe some U.S.
• 9:42
  SPEAKER_00: buyers.
• 9:42
  SPEAKER_00: So, you know, we'll just kind of keep that on our radar.
• 9:45
  SPEAKER_00: You know, we're pretty cautious in this shop to make any really strong uh positions or strategies based solely on China, right?
• 9:53
  SPEAKER_00: But I think you do have to observe that that their hog price is coming up and uh um you know if they come into the market in the US, that that sure will make a difference.
• 10:02
  SPEAKER_01: Are there some uh concerns about supplies backing up in the domestic market with lower exports, you think, or is it not much of a concern yet?
• 10:10
  SPEAKER_00: Yeah, I it's it's I guess to put premiums onto the market the market where we're at.
• 10:14
  SPEAKER_00: Domestic's moving okay.
• 10:15
  SPEAKER_00: I mean, we are you know, 122 is uh is a nice number.
• 10:19
  SPEAKER_00: It's just if we want to kind of support these higher levels and and be able to trade higher cutout values come fall and winter, um, you know, when we're back up to need and Saturdays, well, exports would sure be welcome in that time frame, right?
• 10:32
  SPEAKER_01: Gotcha.
• 10:32
  SPEAKER_00: Any uh final thoughts on fundamentals on hogs or yeah, no, let's just stay at the you know, let's see what next week brings.
• 10:39
  SPEAKER_00: You know, this is the time of year where it makes sense to take some winter risk off the table.
• 10:43
  SPEAKER_00: So, you know, watch margins if we get uh hogs like in this front action, um, and corn, you know, does it rain or not this weekend, right?
• 10:52
  SPEAKER_00: Yeah, but just take advantage of the volatility, Mike.
• 10:54
  SPEAKER_00: That'd be the overarching theme.
• 10:56
  SPEAKER_01: Nice.
• 10:57
  SPEAKER_01: Well, how about uh this conference?
• 10:58
  SPEAKER_01: How'd it go this week, Luke?
• 11:00
  SPEAKER_00: Yeah, no, the conference went really, really well.
• 11:02
  SPEAKER_00: So I I think we talked about it.
• 11:04
  SPEAKER_00: Pat touched on it maybe last uh Friday, the about the National Pork Industry Conference.
• 11:08
  SPEAKER_00: Uh a lot of our listeners probably uh not only know about it, they were probably there.
• 11:13
  SPEAKER_00: I I don't know the official count, Mike, but I 900, maybe a little over registered attendees, right?
• 11:19
  SPEAKER_00: Um so this is uh the conference, national pork industry conference that's in the Wisconsin Dells.
• 11:25
  SPEAKER_00: Um it is a very family-friendly environment, um uh filled with uh with excellent speakers, lots of opportunity to to network with our with our industry stakeholders and and it's and on their families from that standpoint.
• 11:39
  SPEAKER_00: The the conference, the hotel is really centered around a water park.
• 11:43
  SPEAKER_00: So it's it's very popular with the kids and the grandkids.
• 11:46
  SPEAKER_00: So we get a lot of a lot of family involvement at that.
• 11:49
  SPEAKER_00: But we were we were pleased.
• 11:50
  SPEAKER_00: We'd like to say congratulations to 21st Century Strategic Forums who host the conference.
• 11:55
  SPEAKER_00: They did another another bang up job.
• 11:57
  SPEAKER_00: It truly is, Mike, one of the the top uh conferences that is is put on in this country, maybe the world each year.
• 12:04
  SPEAKER_00: Um, we were lucky enough to be a breakout speaker uh on their breakout sessions Monday afternoon.
• 12:10
  SPEAKER_00: So we had three sessions, kind of advanced risk management was the title of that.
• 12:14
  SPEAKER_00: Thank you for for those that attended that.
• 12:17
  SPEAKER_00: Um Tuesday afternoon was a social area.
• 12:20
  SPEAKER_00: We hosted a cabana.
• 12:21
  SPEAKER_00: Again, thank you for people that came by and and and spent some of their nice afternoon with us.
• 12:26
  SPEAKER_00: We really truly cherish those moments.
• 12:29
  SPEAKER_00: Um, just to kind of go over a few high points for the conference, especially if someone hasn't been there.
• 12:34
  SPEAKER_00: I would encourage you that if you're serious about the pork industry, this is a conference you should look at next year.
• 12:39
  SPEAKER_00: But it starts Sunday night, big uh big barbecue family setting.
• 12:43
  SPEAKER_00: So it's a nice way to get re-engaged with with friends and colleagues across the industry.
• 12:49
  SPEAKER_00: Um then it moves Monday into some keynote speakers, uh, usually motivation, uh, some kind of uh development speaker.
• 12:57
  SPEAKER_00: And this year was a gentleman talking about trust.
• 12:59
  SPEAKER_00: Uh David Horsauger did a really nice job with that.
• 13:02
  SPEAKER_00: Then we kind of break into some more industry issues.
• 13:05
  SPEAKER_00: Uh we have our customers there.
• 13:07
  SPEAKER_00: Wendy's was there.
• 13:08
  SPEAKER_00: Uh Wendy's company talked about uh their views on sustainability, also the type of products that you know they look and look to move across the industry.
• 13:17
  SPEAKER_00: Yeah, it's always nice, you know, you want to you know understand what that next level wants, right?
• 13:22
  SPEAKER_00: Or that level before the consumer, if you will.
• 13:25
  SPEAKER_00: So it's it's neat to see them in front of us, and it's interesting to hear their their perpet per uh perspectives and also you know their opportunities and challenges, right?
• 13:34
  SPEAKER_00: Um so kind of moving through, like I said, Monday afternoon, lots of different breakouts, anywhere from production to financial benchmarking to risk.
• 13:43
  SPEAKER_00: Um, so lots of good sessions, lots of good themes.
• 13:46
  SPEAKER_00: Um, moving into Tuesday, um, kind of some things uh you know that we thought were were pretty interesting.
• 13:52
  SPEAKER_00: Um, and uh, you know, started out just kind of some industry opportunities about social media.
• 13:59
  SPEAKER_00: Um, you know, like it or hate it, you know, that's a way to communicate and talk to a lot of people about a lot of forums.
• 14:05
  SPEAKER_00: So we talked about that as an industry and and had some people that are leaders uh from an advocacy space, uh Brennerman's for one, um, along with some other people, kind of show how they do it and then gotta encourage you to get in the game, if you will.
• 14:19
  SPEAKER_00: Heard from our uh uh national pork producers leadership, uh Brian Humphreys, the new CEO of NPPP, kind of showing what we're doing from a uh uh uh MPPC uh standpoint to to advance the industry.
• 14:33
  SPEAKER_00: And um then got a nice perspective from Christine McCracken, uh Rabobank, uh kind of looking at this global perspective, right?
• 14:40
  SPEAKER_00: And you know, kind of like I touched on in the hog fundamentals, the exports, you know, that's a that's a really big deal for us that we they keep what we have, but if we you know our exports are down year to date, right?
• 14:52
  SPEAKER_00: So it's expanding those kind of in this second half of the year, which which does have a good possibility of happening, maybe just from the perspective that China stopped about a year ago now, so the year-to-year comparisons get a little easier, right?
• 15:06
  SPEAKER_00: Um, but just kind of the macro observations that you know domestically, like our hog and pig report told us, you know, we have less sows here in the states, China herd is shrinking, European herd is shrinking.
• 15:17
  SPEAKER_00: So we we do have kind of an environment where we don't have global any any expansion anywhere in the globe makes a lot of sense with all the issues we've worked through, high feed costs, inflation, right?
• 15:28
  SPEAKER_00: Every country is fighting that uh to real similar degrees as us, right?
• 15:32
  SPEAKER_00: So kind of a backdrop where we kind of we don't have expanding proteins, and that's not just I say proteins, not just on the the hog side, you know, chicken inventories, chicken supply is coming down, beef is turning a corner, right?
• 15:44
  SPEAKER_00: Where that kind of supply is uh is changing.
• 15:47
  SPEAKER_00: So we do, you know, have a stage where it looks like from a protein perspective, we we have some opportunity, but we're we're still coupled with high costs, right?
• 15:56
  SPEAKER_00: I mean, corn is showing some breaks and stuff, but we we still, you know, what 22 months we've been depleting this corn uh pipeline, right?
• 16:04
  SPEAKER_00: Maybe this year with a big US crop, we can start to fill that back up a little bit, but still have to get this crop finished out, right?
• 16:10
  SPEAKER_00: And you mentioned how important these rains were, big deal, right?
• 16:13
  SPEAKER_00: Um but uh that yeah, some optimisms kind of around that, but then coupled, uh, you know, so we got kind of those nice things working for us, but some of the headwinds like you discussed, right?
• 16:24
  SPEAKER_00: Inflation, uh, fear of recession, you know, and that kind of you know, that that that issue can can sink all boats, right?
• 16:31
  SPEAKER_00: So can some of the lower supply, what you know, how's that coupled with you know the bigger aspects of of inflationary pressures and whatnot?
• 16:39
  SPEAKER_00: So so anyway, um obviously that's gonna kind of go along with with our perspective.
• 16:44
  SPEAKER_00: It was commented by several speakers, including us, that there are some opportunities out there, um, but very volatile times, lots of risk at play.
• 16:53
  SPEAKER_00: Um, you know, so producers need to manage risk.
• 16:56
  SPEAKER_00: Um, you know, also kind of was highlighted, and and we've talked about it too.
• 17:00
  SPEAKER_00: There, you know, along with that, there are some great tools, new tools to manage risks, specifically some of the insurance products, like like LRPs, which we've talked about on our podcast.
• 17:09
  SPEAKER_00: So, so that was encouraged by many many speakers.
• 17:12
  SPEAKER_00: Just let's, you know, let's look at this landscape, but you know, don't forget that there's a lot of risk out there, a lot of moving pieces, and you know, let's let's protect and defend where we can and you know keep ourselves in position to keep fighting and growing in this thing, right?
• 17:27
  SPEAKER_01: Well, thank you to everyone who uh said hi at the conference, and uh thank you for coming on the show today, Lucas.
• 17:34
  SPEAKER_01: And uh any other final words for our listeners?
• 17:37
  SPEAKER_00: Uh I just hope everybody has a great weekend, and uh let's hope maybe it boils up a few thunderstorms and showers for us, Mike, right?
• 17:44
  SPEAKER_01: Yeah, we're gonna need it.
• 17:45
  SPEAKER_01: From a risk management perspective, this is no time to fall asleep at the wheel.
• 17:49
  SPEAKER_01: If you need anything, please give us a call.
• 17:52
  SPEAKER_01: And thank you to all our listeners.
• 17:53
  SPEAKER_01: Please reach out to us from our website at professionalagmarketing.com or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 18:05
  SPEAKER_01: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.